Market Timing and Exceptional Giving

Date: November 20, 2013 Author: aque Categories: Latest News

When it comes to "exceptional" charitable giving, timing matters. The recent surge in stock market indexes in Canada and the U.S. presents an opportunity for donating public securities. It's a moment that is important for philanthropic individuals and their advisors to recognize and understand.

Exceptional charitable giving is different than annual giving. Annual, regular gifts are typically from income and are triggered by a solicitation or simple altruism. Philanthropic research shows tax plays a minimal role in these donations. Exceptional gifts, by contrast, typically involve assets and are 10 or even 1000 times more than an annual gift. These gifts are considered in the context of financial and estate plans. Tax and market values may be important triggers for these gifts, although not a motivator of the gift itself. Exceptional giving is what we facilitate at Aqueduct Foundation.

Rising markets, especially when they occur at the end of the calendar year, provide three benefits for donors:

Positive Mindset: Giving is easier when a donor has confidence that he or she has enough. Rising price of securities creates real wealth - there is more to share and to retain. Higher stock values also provide a psychological boost to the donor. With exceptional gifts typically the decision to give has been made, but higher stock prices are the catalyst - enabling a larger gift and providing a feeling of confidence.  

 Taxes: Giving public securities produces two tax savings: a tax credit worth up to 50% (or deduction if the donor is a corporation) and nil capital gains. The greater the capital gain of a stock the larger the second tax saving, which can be up to 25%. If the stocks have been owned for years or acquired through a dividend reinvestment plan, a donation provides an additional benefit: the adjusted cost base does not need to be identified.  

Tax Deadline: An exceptional gift of stock is best donated before December 31. A year-end receipt means the donor reduces the amount of time before receiving the tax refund.   Like tax-loss selling, stock donations are most commonly executed at year end.

Aqueduct Foundation is a public "planning" foundation with donor advised fund or "personal foundations" that are private, nimble and offer unparalleled flexibility in granting to charities of the donor's choice.

Malcolm D. Burrows and the Aqueduct team:

Rosaline Chan          Vancouver 1-888-723-1122